Tech companies pile on patents, complain about clutter

JohnLetzing

SAN FRANCISCO (MarketWatch) -- When a Microsoft Corp. patent application for educational technology appeared in January, there was one problem: the idea had already been developed as "BlueJ" nine years earlier, and by academics with no connection to the software behemoth.

BlueJ designer Michael Kolling immediately complained, eliciting a public statement from Microsoft that "the patent application was a mistake" and would be removed. Kolling recently told MarketWatch that Microsoft has since made good on that promise.

Microsoft's accidental patent application may not be surprising, given that it has filed a blizzard of over 10,500 such applications in the past three years -- more than three times the number it had filed in the preceding three years. And Microsoft is certainly not unique as a technology company that's become extremely aggressive with patenting.

But even as technology companies weigh down the U.S. Patent and Trademark Office with record numbers of applications, at the same time they're pressing the government for reforms to help sort through the resulting clutter.

As technology companies weigh down the U.S. Patent and Trademark Office with record numbers of applications, they also are pressing for reforms to help sort through the resulting clutter.

Microsoft, IBM, H-P and other companies are members of a group called the Business Software Alliance. The BSA is lobbying for reforms of the current patent system including dedicating more time to considering applications, in hopes that would limit the arming of small, litigious companies with questionable patent awards.

"Clearly there is some irony there," said Kristie Prinz, an intellectual property attorney with The Prinz Law Office in Los Gatos, Calif., "If you are sending significant numbers of patent applications to the U.S.P.T.O. and then complaining in the same breath."

Companies like Microsoft
MSFT, +1.25%
International Business Machines Corp.
IBM, +0.46%
Hewlett-Packard Co.
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and others see big patent portfolios as imperative. They are all seeing their markets increasingly converge, forcing them to build legal protection for each new business they enter. They must also shield themselves from future lawsuits from small companies with no more than patents to their names. Additionally, big patent portfolios are just too potentially lucrative for technology companies to neglect.

But while they churn out applications, technology companies complain that the current system is getting too bogged down to function as efficiently as they would like it to.

Pressing the issue

Emery Simon, a counselor to the Business Software Alliance, said the group would like to see "more of a system to make sure only meritorious patents get through," by employing more examiners with more time for application examinations. "The hiring is an issue, how much time they spend is an issue," Simon said.

Meanwhile, IBM, H-P, Microsoft and others have made certain that existing examiners must sift through expanding workloads.

An H-P spokeswoman said the company has filed roughly 10,000 patent applications in the past three years, nearly twice the number it received during that period.

IBM does not disclose its number of patent applications, but IFI Patent Intelligence, a company that evaluates patent applications, estimates that IBM has filed at least 12,300 during the past three years, nearly a third more than its total awards during the period.

To grapple with the influx, U.S. Patent Office spokeswoman Brigid Quinn said the office now employs 5,000 patent examiners, and plans to double its number of examiners over the next four to five years.

Simon said of the government patent office that, "I think they're doing all the right things... they just have a pretty serious situation on their hands."

Further reform of the patent system may come courtesy of a bill introduced last year by California Rep. Howard Berman, now chairman of the House Judiciary Subcommittee on Courts, the Internet and Intellectual Property. That bill, which calls for expanded consideration of patent filings, has since been referred to the House Judiciary Committee.

In addition, IBM, Microsoft, H-P and others have helped fund the Community Patent Review Project, enabling a network of experts to collaborate online to review applications -- essentially outsourcing expertise for the government. A pilot version of the project will commence in May.

The attraction of licensing revenue has spurred much of Microsoft's patenting flurry, according to Microsoft general manager of IP & Licensing David Kaefer. Microsoft does not disclose its IP licensing revenue separately, but Kaefer said it's gaining on IBM. IBM saw $900 million in intellectual property and custom development income in 2006, according to company filings.

IBM
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was also perennially first on the annual list of top ten patent winners issued by the government agency until 2005. When it announced the demise of that top ten list in January, the patent office said it was "emphasizing quality over quantity by discouraging any perception that we believe more is better."

The government, if it hires more patent examiners as planned, may become more likely to quickly weed out an application like that filed by Microsoft and protested by BlueJ developers.

Kaefer said he was unaware of the BlueJ case, but said instances where patent applications are aborted are common.

"There are frequently circumstances where you file for something then during the process or even after you discover there's prior art," Kaefer said. BlueJ's Kolling said he was disappointed that Microsoft did not offer details on how the mix-up had occurred, but added that he is satisfied that the application has been "expressly abandoned."

Getting defensive

While licensing revenue is attractive, another reason to bulk up on patents is defensive -- that is, filing for ideas not yet developed, in order to pre-empt lawsuits from competitors in future markets.

Microsoft raised hackles among developers late last year, when a patent application from the company surfaced that was related to really simply syndication, or RSS, technology. RSS is used to feed updated news through the Internet, and is already widely deployed by many companies. The blogosphere was quick to respond with criticism.

Microsoft attorney David Rudin responded on his own blog that the RSS patent was a defensive move, adding, "Given the size of a target that Microsoft presents for patent suits... it's only prudent for Microsoft to take actions."

In addition to Microsoft, H-P and other technology companies also file defensive patents as a normal part of doing business.

Sunstein said that on balance, the government has dealt well with the increase in technology company patents. "It's not to say the system is perfect," Sunstein said, "they do make mistakes, but it works quite well."

Sunstein said the growth of applications to the U.S. Patent Office is merely "recognition by the companies doing it that patents do matter, even for big companies."

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